Sacyr Pledges to Finish Panama Canal Work After Halt Threat

Jan. 14 (Bloomberg) -- Sacyr SA pledged to complete its
contract to expand the Panama Canal, edging back from a threat
to suspend the project if the waterway’s authority didn’t offer
compensation for unexpected costs.

“We are only contemplating the scenario of reaching an
agreement,” Sacyr Chairman Manuel Manrique told reporters at
company headquarters in Madrid yesterday. “The work will be
completed. That is a commitment we will fulfill.”

Sacyr and Italian partner Salini Impregilo SpA threatened
on Dec. 31 to halt work expanding the waterway if additional
costs amounting to $1.6 billion -- about half the size of the
initial contract -- weren’t met. Government officials have been
trying to broker a deal, with Panamanian authorities suggesting
they could get another builder to finish the work, and the
companies have since scaled back their demands.

As Spain’s economy struggles to emerge from a five-year
slump and the government continues to cut spending on public
works, indebted Spanish builders are dependent on foreign
projects for revenue. More than half of Sacyr’s revenue comes
from abroad, and 25 percent of its nine-month international
revenue came from Panama, according to the company’s latest
earnings report.

Stock Declines

Shares in Sacyr, which fell as much as 19 percent the day
the suspension threat was announced, declined 1.2 percent at
12:33 p.m. in Madrid, valuing the company at 1.68 billion euros
($2.3 billion). Salini Impregilo fell 1.1 percent in Milan.

The Sacyr-led group is due to build locks on both sides of
the 80-kilometer (50-mile) waterway, shortening voyages from the
U.S. to Asia and potentially reducing transport costs for
commodities such as liquefied natural gas. Even before the
threat to stop work in 21 days if demands weren’t met, delays
have pushed back the initial 2014 completion date to 2015.

Manrique said yesterday the construction would be finished
next year, as he works toward an agreement. The group of
companies has already invested $280 million to cover the
additional costs of the project, which is almost 70 percent
complete, he said.